The Fed held rates at 3.75% to 4% with two hawkish dissents, and traders turned straight to earnings season and a revived AI trade
The Federal Reserve held interest rates steady on Wednesday. Markets responded with a polite nod and then moved on to more pressing matters.
Those matters are tech earnings and a rebound in AI stocks. For investors, the more important number this week may come from a quarterly report rather than from the Fed.
A hold, with a hawkish undertone
On October 28, 2026, the Federal Open Market Committee voted 10-2 to keep the federal funds rate in a range of 3.75% to 4%. The committee pointed to elevated inflation. It also said it wants more economic data before making any further adjustments.
The stated backdrop was upbeat. Policymakers described strong economic expansion, resilient domestic spending, and robust capital investment, while repeating their commitment to bringing inflation back to the 2% target.
The dissents are where things got interesting. Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack both voted against the decision. They wanted a 25-basis-point rate increase.
So the disagreement inside the room was not about when to cut. It was about whether to hike. The meeting also marked Cook’s first dissenting vote.
Chairman Kevin Warsh struck a balanced tone at his post-meeting press conference. He acknowledged strong productivity and capital investment. He also stressed that the Fed needs to keep watching inflation and incoming data to guide its next moves.
Markets change the channel
Stocks did not treat the decision as a major event. US indices posted modest gains after the announcement. The tech-heavy Nasdaq led the way.
Much of that strength came from renewed momentum in AI-related names. Two developments drove the enthusiasm: Anthropic’s filing for an initial public offering, and financing deals involving several chip suppliers.
Then there is earnings season. S&P 500 earnings growth is projected at around 25% year over year for the third quarter, with some estimates in a range of approximately 25% to 27%.
Much of that growth is credited to AI infrastructure spending by the largest technology companies. If the projections hold, it would be the third consecutive quarter of growth above 25%.
What this means for investors
The central question is whether earnings can keep doing the heavy lifting. A rate held at 3.75% to 4% is not cheap money, so equity valuations depend heavily on profit growth rather than falling borrowing costs. Projected growth of around 25% gives the bulls a solid argument, but it also sets a high bar.
The two dissents are the risk most likely to be underestimated. Both Cook and Hammack wanted a hike, not a cut. If inflation stays sticky and more officials join them, the conversation could move toward tightening. Warsh’s emphasis on watching the data keeps that door open rather than closing it.
There is also a concentration question. The AI rebound is being driven by a relatively narrow set of catalysts: hyperscaler spending, chip supplier financing, and a high-profile IPO filing. Investors watching the Anthropic filing will want to see how public markets value an AI developer once detailed financials are in the open.
The things to watch are capital spending guidance from the largest tech firms, demand signals from chip suppliers, and the next round of inflation data. That last item could decide whether the hawkish minority on the FOMC remains a minority.
